On one hand, the Springboks were on their way to becoming Rugby World Cup champions, the #ImStaying movement is gaining significant social media traction and the country was gearing up for another major Investment conference. On the other, a Moody’s downgrade of our sovereign credit rating looms large, we can’t make a dent in our unemployment stats and we’re sweltering through a heatwave and not sure we can keep the aircon on because of an unstable electricity supply.
Investment markets are fascinating animals as they combine the past, the present and the future. On one side, you want to see how your investments have performed and at the same time you want to find information that will tell you how your investments might perform going forward.
Let’s first take a look at some of the key statistics reported at the OUTvest Investment Committee meeting, looking at the past 12 months (Quarter 3 - 2018 to Quarter 3 - 2019) on a total return basis (taking into account income and capital growth):
The FTSE / JSE All Share Index returned 1.9%, compared to the S&P 500 composite Total Return index which delivered 4.3%. While it is no secret that US equities have outperformed local equities, it is worth looking at the make-up of the All Share and seeing where the returns did [or didn’t] come from. The Resource index was up 7.9% and encouragingly the Mid-Cap index rose 5.1% over the past 12 months.
In contrast, financials were down 4.2% while the Industrial Index was down 11% - impacted by a re-weighting and decline in the Naspers share price.
The FTSE / JSE SA Listed Property Index is down 2.7% compared to the S&P Global Property index which rose 13%. Listed property in South Africa has been particularly poor in recent years and the outperformance of the international index is partially driven by Rand weakness.
The Rand weakened by 6.7% against the US dollar and lost 1.2% against the Pound. The Rand was 0.6% weaker against the Euro.
The South African All Bond Index delivered 11.5% over the past 12 months while the FTSE Global Government index returned 10.1%.
Now let’s take a look at some reasons to feel more positive about your investments:
The FTSE Mid-Cap index (up 5.1% over the past 12 months) is an interesting indicator to follow. This represents shares outside of the popular Top 40 (41 – 100). As investors begin to see value outside of the largest shares, this suggests risk appetite for SA equities is on the rise
President Ramaphosa announced over $16bn of new investment projects coming into South Africa with the likes of Sappi, Toyota, Woolies, Foschini, Edcon, BMW, Ford and Volkswagen committing further investment to the region
The launch of a major automotive hub and Special Economic Zone (SEZ) in Tshwane estimated to drive R3.5bn of investment
A rebound in the precious metals (Platinum and Gold) in both Rand and Dollar terms is likely to drive investment
Ratings agency Moody’s has put South African policy makers on notice saying that they want to see greater evidence of economic reforms in the next 3 months to stave off a downgrade
- Arguably most importantly …. For the next 4 years, the Springboks will be introduced as “World Champions”
While there are no quick fixes for the South African economy, as the Springboks have shown – with the right leadership we can enjoy significant turnarounds in fortunes in a relatively short space of time.